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What I do is to use DiskUtility to create a sparse image (see updateable images in the FAQ) and create a max size of about what I think I'll ever need. For example, my system drive is 250GB, but my sparse image max size if only 90GB, and I have about 20GB for expansion over time.
On my backup drive (also 250GB external firewire (the OWC Mercury Pro), I did a minimal Tiger install (only one print driver for my main printer, no language translations) which takes only a couple of gigs and is insured to boot up with DiskUtility in place. Then I create the sparse image and do a SU full backup. After that, I perform "smart" backups to update the sparse image. The rest of the drive is available for other uses (like other SU backups for my iTunes files stored on yet another drive).
If disaster strikes, I can boot the backup drive and use DiskUtility to restore my system drive to the most recent backup.
Ed
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